(Click to enlarge charts)
What happened yesterday
The Hong Kong 40 Index (proxy for the Hang Seng Index) has rallied as expected through the bullish breakout of its former short-term resistance at 22700/22630.
This morning, it has gapped up and almost hit our upside target at 23170 (printed a current high of 23152). Please click on this link for a recap on our previous daily outlook.
- The Index is now approaching a significant medium-term resistance zone of 23500/24000 which is defined by the descending trendline joining the highs since 26 May 2015, close to the previous swing low of 08 July 2015 and the 38.2% Fibonacci retracement of the steep down move from 26 May 2015 high to the “Black Monday”, 24 August 2015 low.
- In the shorter-term, the aforementioned trendline resistance also confluences with the 1.00 Fibonacci projection from 29 September 2015 low to 06 October 2015 low @2pm at 23600.
- The hourly (short-term) Stochastic oscillator has just turned up near its oversold region and still has room for further potential upside before reaching its extreme overbought level. This observation suggests that upside momentum remains intact.
- The former short-term resistance (in dotted pink) is now acting as a pull-back support at 22620.
Key levels (1 to 3 days)
Intermediate support: 22800
Pivot (key support): 22620
Next support: 22260/22180 (weekly pivot)
Short-term technical elements remain positive. We have tightened the daily (short-term) pivotal support to 22620 for a potential direct rise to towards the key medium-term resistance at 23500/23600.
On the flipside, failure to hold above the 22620 short-term pivotal support is likely to negate the bullish tone to see a deeper pull-back to retest the 22260/22180 weekly pivotal support (neckline of the “Double Bottom” bullish breakout).
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